When you create a Scoped Application there are basically 2 ways to deploy it for a customer — Publish to Application Repository or use the Publish to Update set UI action.

If you publish to the Application Repository (App Repo) then any connected instances that the application is installed in will get a version of a record called a “sys_store_app” installed on them. A repo-installed sys_store_app will not be allowed to use Studio to edit files on the other instances, but it will be able to query the App Repo for newer versions of the the app to be installed.

If you publish via Update Set, then any instances that it gets installed on get a copy of the “sys_app” file (and all other application components). An Update set-installed sys_app WILL be able to be edited in studio but CANNOT receive updates via the repo.

I’ve come across an article that says that we should not mix-and-match Update Set and App Repo methods for updating applications. If you’ve used the App Repo to deploy the app in the first case, then you should continue to use the App Repo to publish changes and versions of the app to the downstream instances.

Link for sources — https://support.servicenow.com/kb?id=kb%5Farticle%5Fview&sysparm%5Farticle=KB0715422